Business context and reporting period
This is Good Works Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2021, not an operating-company filing by Cipher Digital Inc. Good Works was a SPAC with no operating business or revenue; it was seeking a business combination. On March 5, 2021, it agreed to combine with Cipher Mining Technologies Inc. and change its name to Cipher Mining Inc. The transaction had not closed as of the reporting period.
Financial results and position
- Revenue: None; the company reported it had not commenced operations.
- Net loss: $8.43 million for Q1 2021, including a $7.53 million noncash loss from the increase in warrant liability, $942,294 in operating and business-combination expenses, partly offset by $37,656 interest income. Loss per non-redeemable share was $1.47; reported income per redeemable share rounded to $0.00.
- Cash flow: $662,758 net cash used in operating activities. Cash outside the trust fell from $1.28 million at December 31, 2020 to $613,606 at March 31, 2021.
- Liquidity: Working capital was approximately $502,052. Trust assets were $170.06 million, primarily U.S. Treasury securities, and were restricted for the business combination or permitted distributions. The filing says management did not expect to need additional funds for ordinary pre-combination expenses, but notes financing could be needed if costs exceed estimates or redemptions are high.
- Liabilities and equity: Total liabilities were $17.11 million, including $16.69 million of warrant liabilities; current liabilities were $410,781. The company reported no long-term debt or lease obligations. Redeemable shares of $148.87 million were classified as temporary equity.
Changes versus prior period
Compared with December 31, 2020, cash outside the trust declined by $662,758; warrant liabilities rose from $9.17 million to $16.69 million, principally driving the quarterly loss; and shares classified as subject to possible redemption declined from 15,730,400 to 14,887,220. The filing does not provide a comparable prior-year-quarter income statement, so year-over-year operating comparisons are unavailable. The financial statements were restated to reflect warrants as liabilities.
Transaction, outlook, risks and unusual items
- The proposed merger was expected to close in Q2 2021, subject to stockholder approvals, regulatory clearance, an effective registration statement and other conditions. Cipher’s sole stockholder was to receive 200 million Good Works shares valued at $10 per share.
- Concurrent PIPE subscriptions contemplated $375 million gross proceeds from 37.5 million shares at $10 each. Cipher’s stockholder, Bitfury, also agreed to a 5 million-share private placement in exchange for a services-fee discount arrangement. Cipher’s closing condition included at least $400 million of combined trust and PIPE cash after redemptions and specified expenses.
- Good Works had 21 months from its October 2020 IPO closing to complete a business combination; otherwise, it was required to cease operations and redeem public shares, subject to applicable requirements. Public warrants would receive no trust-account distribution in a liquidation and could expire worthless.
- Management noted possible adverse COVID-19 effects but said the specific impact was not determinable. The filing also warns of possible funding shortfalls, redemptions and transaction-completion risk. No material changes to previously disclosed risk factors were reported.
- Control issue: Management concluded disclosure controls were ineffective as of March 31, 2021, solely due to a material weakness associated with the warrant-accounting restatement. No material change in internal control over financial reporting during the quarter was reported.
Investor facts to verify
- Confirm the correct issuer and security: this filing is for Good Works Acquisition Corp., although it describes a proposed combination with Cipher Mining Technologies Inc.
- Check subsequent filings for merger closing status, redemption levels, actual cash proceeds, PIPE funding and satisfaction of the $400 million cash condition.
- Review the warrant restatement, valuation assumptions and remediation of the disclosed material weakness in disclosure controls.
- Reconcile the trust-account and offering-proceeds amounts across the filing; some narrative passages describe IPO and private-placement proceeds inconsistently.
- Assess transaction expenses, related-party arrangements, Bitfury service-fee terms, and the consequences of redemptions or failure to complete the combination.